Foreign direct investment

FOREIGN DIRECT INVESTMENT

Presented by:Shyamashree DasAsha JaikishanNeha AgarwalS. PramothAnirban Das

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CONTENTS

About FDI Types of FDI Theories Of FDI Joint Venture- Nokia Siemens Acquisition – HCL Axon Merger- RPL & IPCL

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WHAT IS FORIGN DIRECT INVESTMENT?

FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor.

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TYPES OF FDI

HORIZONTAL FDI: It is investment in the same industry abroad as at home.

Example: Ford builds an automobile manufacturing facility in Mexico.

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Contd.

VERTICAL FDI: It is found when a firm invests abroad in other operations in terms of supply of inputs or to have control over marketing its products.

It has two forms- Backward and Forward.

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Contd. Backward FDI is investing in an industry which

supplies your firm at home. Example, if Ford builds an engine production

facility in Mexico which ships engines to it manufacturing site in Texas.

Forward FDI is investing in an industry which buys from your firm at home.

Example, if Ford buys seven dealerships in Mexico City which it uses to distribute its cars made in Texas.

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BRODER CLASSIFICATION OF FDIGREEN FIELD INVESTMENT: A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Example: General Motors of the USA has 20%share in the equity of the Italian firm Fiat and Fiat maintains 5% share in the equity of General Motors.

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Contd.BROWN FIELD INVESTMENT: It denotes a combination of green-field investment and M&As.

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FOREIGN DIRECT INVESTMENT

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JOINT VENTURE

A Joint Venture (JV) Is An Entity Formed Between Two Or More Parties To Undertake Economic Activity Together.

The Parties Agree To Create A New Entity By Both Contributing Equity And Then They Share In The Revenues, Expenses, And Control Of The Enterprise.

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BringingNetworks To Life

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Profile Of Both Companies

NOKIAFOUNDED Finland, 1865

HEADQUARTERS Espoo, Finland

KEY PERSON Olli-pekka Kallasvuo,President& Ceo

INDUSTRY TelecommunicationsInternetComputer Software

PRODUCTS Mobile PhonesSmartphonesMultimedia ComputersNetworks

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About Joint Venture

• 50-50 joint venture between Nokia's Networks Business Group and Siemens' carrier-related operations for fixed and mobile networks was announced on 19 June, 2006.

• For broad scale advantages and worldwide presence. •To gain Market strength and leading position in fixed-mobile convergence.

• Nokia Siemens Networks began full operations on 1 April 2007

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About The Company• Nokia Siemens Networks is a leading global enabler

of communications services

• Nokia Siemens Networks is one of the largest telecommunications infrastructure companies with operations in 150 countries.

• The company is headquartered in Espoo, Finland.

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Contd.

Financial reportingConsolidation by Nokia.

Equity accounting by Siemens.

Market Position No. 2 in Wireless Network No. 2 in Operator Services No. 3 in Wireline Networks

Key people Simon Beresford-Wylie CEO (Nokia) Eric Simonsen CFO (Siemens AG) Olli-Pekka Kallasvuo Chairman (Nokia)

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AcquisitionMeaning: When one company purchases

another there is no exchange of stock or consolidation as a new company.

Types:• Friendly: The companies cooperate in

negotiations • Hostile : Acquiring company makes a sudden

purchase of shares of the target company with a limited time

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Acquisition

ACQUIRES                 

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About HCL

• Hindustan Computers Limited is India’s 4th largest leading global IT Services companies .

• Founded on 11th August 1976• Headquarters : Noida ,UP,INDIA• CEO: Vineet Nayar• Industry: Information Technology Services

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About AXON

• Axon Group plc is a leading British-based consultancy dedicated to assisting customers using SAP as their Enterprise resource planning system .

• Founded on 1994• Headquarters: Egham, Surrey• Industry :Consulting

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About Acquisition

• HCL Technologies Ltd has completed the acquisition of UK-based Axon Group in a £441.1 million all-cash deal

• Infosys Technologies had also offered to buy Axon for £407.1 million

• But the HCL made a announcement that it has offered £441.1 million to buy Axon.

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Contd.

• It is the largest overseas acquisition by an Indian tech firm

• They merged the HCL SAP practice under Axon leadership in form of HCL AXON .

• Steve Cardell will continue as a president, HCL Axon

• HCL will raise funds through a loan from Standard Chartered.

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Structural Change

• Axon will help to add SAP consulting in Europe to HCL's existing services.

• SAP will be a hot property in future terms of application implementation.

• IT would catapult HCL to the 12th position in terms of SAP implementation globally.

• Business accounting for 25 percent of HCL's revenues

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BENEFITS

• It is very Strategic for HCL• Axon has consulting and blueprinting

business.• Strategic alliance for the customer• It adds value to the HCL• Significant impact on global revenues,

margins and market share.

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Merger

The combining of two or more entities into one,through a purchase acquisition or a pooling of interests. Differs from consolidation in that no new entity is created from a merger.

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IPCL

Merger

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General Idea About Companies

TThe appointed date of merger of IPCL with RIL was April 1,2007It is a Horizontal type of merger

FOUNDED Public(NSE:Reliance)

HEADQUARTERS Navi Mumbai, India

KEY PERSON Mukesh AmbaniPresident& Ceo

INDUSTRY Oil Conglomerates

PRODUCTS Petroleum & Petroleum Products

IPCL

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Factors Leading To Merger Tax Saving ActivityGCPTCL IPCL RIL

Increasing Revenue From Chemicals

Reliance Supplying Raw Materials To IPCL.

Merger Will Help Reliance To Take On Competition From West Asian Countries Which Enjoyed Highly Subsidized Feedstock's And Financial Concessions

Moving From Stereotype To Dynamic Business Model

IPCL

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The Deal

•The merger increase treasury stock and market capital: The combined entity will have a market cap of Rs 2,00,000 crore

•Emergence of new products: Polypropylene and Polyethylene and a couple of new products like Polybutadiene rubber and Acrylic fibre

•Government Participation: Government holds 10.40 lakh shares accounting for 0.35 per cent of IPCL's equity capital.

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Financial year 2006 (in Rs Crore)

Particulars Reliance Ind. IPCL Merged Entity

Net Sales 80,877.79 10,884.78 91,762.57

Net Profit 9,069.34 1,163.75 10,233.09

Total Assets 76,640.69 7,732.09 84,372.78

Reserves 48,411.00 4,681.92 5,309.92

Net Worth 46,050.47 4,930.97 50,981.97

Financial year 2007

Net Sales 79,468.00 8,519.00 87,987.00

Net Profit 80,55.00 1,047.00 9,102.00

Market Capital 1,79,672.21 6,996.83 1,86,669.04

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Structural ChangesWhopping Up Reliance Balance Sheet-

IPCL'S FY07 Net Profit Close To Rs1,000 CroreA Cash Balance Of Around Rs1,100 Crore. The Combined Net Worth Of The Merged Entity Will Be Over Rs50,000 Crore .

Caring The IPCL Share Holders-

Reliance Have Issued Around 5.5 Crore Shares To IPCL ShareholdersShareholders Will Be Benefited From RIL'S Overall Dynamism

Combined Marketing And Sales Function

IPCL

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BenefitsEnhancement Of Business Strength

Participation In Diversified Business Portfolio

Product Exchange

Together, IPCL And Reliance Will Create One Of The World's Largest Petrochemical Companies.

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